PricewaterhouseCoopers advises on listings in Singapore

Compliance with financial reporting standards, good corporate governance, taxation issues and investor relations are amongst the critical pre-requisites of successful listing in Singapore.

Ho Chi Minh Cityand Hanoi, 29 July 2009 - According to Mr Tuck Seng Tham, a partner of the Capital Markets Group of PricewaterhouseCoopers Singapore, Vietnamese companies interested in increasing their visibility in the international capital markets should consider listing in Singapore. “Listing overseas is a major challenge to any company as there are many rules listed companies need to comply with requiring significant investment in time and other resources from Vietnamese companies. However, there are clear benefits for those making the investment and given the strong commitment of the Singapore Stock Exchange (SGX) to attract Vietnamese companies to list there, the time is right to asses overseas listing plans” Mr Tham told to representatives of Vietnamese companies at seminars organised by invitation in Ho Chi Minh City on 27th July and in Hanoion 29th July by the Singapore Stock Exchange, PricewaterhouseCoopers, Kelvin Chia and Partners, Stirling Coleman, Tembusu Partners and Kinetica.

Ian Lydall, General Director of PricewaterhouseCoopers Vietnam added that “PricewaterhouseCoopers regularly highlights to Vietnamese companies, regulators and the media, the potential benefits companies receive from overseas listing. Companies will have the ability to access a broader international investor base, to generate more funds, to increase the visibility of the company’s brand name and products, and - for some industries – to diversify the market risk. However, there are also certain challenges that companies should carefully consider. These include Financial Reporting Requirements, corporate governance and internal controls, International Tax issues, Investor Relations and other written and unwritten rules companies are expected to comply with in the market they choose to list.”

Financial Reporting Requirements

In his presentation to Vietnamese companies, Mr Tuck Seng Tham highlighted that “one of the regulatory requirements for companies to list in the Singapore Stock Exchanges is the presentation of three years of audited financial statements prepared either under the Generally Accepted Accounting Principles of the United States (US GAAP), Singapore Financial Reporting Standards (SFRS) or International Financial Reporting Standards (“IFRS”). IFRS or SFRS is the choice of most foreign companies filing for listing in Singapore.” IFRS are standards and interpretations adopted by the International Accounting Standards Board (IASB) for companies preparing financial statements. IFRS have been adopted as a reporting requirement in most major capital markets, necessitating Vietnamese companies reporting under the Vietnamese Accounting Standards (VAS) to adopt IFRS ahead of a planned overseas listing. Companies filing for listing in Singaporemay also need to submit Proforma Financial Statements and / or Interim Financial Statements depending on their IPO schedule and in case of the occurrence of certain business events subsequent to the period covered in the three year financial statements. In addition to historic Financial Statements companies are also required to submit a two year profit forecast, the first year of which needs to be submitted for Auditors for opinion on computation and consistency of accounting policies.

Mr Tony Dang, a Vietnamese PricewaterhouseCoopers professional who worked six years in Ho Chi Minh cityand have been with PricewaterhouseCoopers Singapore since 2004 highlighted that “most Vietnamese entities do not prepare IFRS financial statements, and even if they do, the auditor’s report is not always unqualified.” The reason is that in order to fully comply with IFRS, Vietnamese companies must maintain a system whereby necessary information, including future and past data, can be captured and presented in a way that enables the companies to prepare IFRS financial statements. Although there are similarities between Vietnamese Accounting Standards (VAS) and IFRS, there are lot of differences too, the conversion process requires sophisticated planning as it is costly and involves many important parts of a company’s operation. The move to compliance is a considerable task that can take at least two years for a medium-sized Vietnamese company. However, for large companies with complex legal and business structures, IFRS conversion might take up to three years, or even longer. As such, the management is required to dedicate a significant amount of time and qualified resources to address the issue. IFRS conversion projects are especially complex in financial institutions whose network is extensive and whose products are diversified. We need to emphasise that, following IFRS conversion, the financial statements need to be audited, and if there are areas of non-compliance, any resulting qualifications in the auditors report will not be well received by stock exchanges or investors.

In addition to reporting the company’s results for the three financial years prior to the listing, companies listing in Singapore will also have to comply with detailed rules on ongoing financial and other reporting requirements. In addition to detailed quarterly reports, compliance with the listing rules will require companies to publish details about many other significant events (such as changes in management structure, legal challenges and environmental issues) on a timely basis.

 
Corporate governance and Internal Controls

Good corporate governance practices are as important as financial reporting.  Issues such as the independence of directors, disclosure of related-party transactions, and the effectiveness of the audit committee appear to be areas where Vietnamese companies will need to exert more effort. Companies listed in Singapore and other overseas markets are also expected to have robust internal controls systems and procedures in place which are sufficiently effective to prevent fraud and errors.

International taxation

Tax planning is an area that cannot be overlooked by overseas listed companies. What are the tax implications for investors who trade on overseas stock exchanges? An uncertain tax position may reduce the attractiveness of Vietnamese shares and may have adverse impact on their listing overseas.  This issue needs to be given serious consideration before listing takes place.

 

Investor relations

Following listing in Singaporeor any other overseas market, Vietnamese companies will be exposed to more and more international investors who will expect high levels of assistance from companies in making sure their activities can be easily monitored. A user-friendly website, updated daily, that contains all publicly available information about the company is international best practice. Current and historical financial reports, company history, press releases, updates on share prices and further details about the business operations of the company are expected. In addition, it is customary for major investors (for example, pension funds and other prominent members of the investing community) to contact the company from time to time to ask permission for company visits, or for clarification of issues which are unclear based on publicly available information. Accordingly, companies listed on major stock exchanges normally operate a separate investor relations department.
 

The cost of listing in Singaporeor other overseas markets

Vietnamese companies should be aware that the cost of overseas listing transactions is much higher than for domestic listing, as the process requires the involvement of internationally recognised underwriters, auditors, legal counsels and advisors, etc.  A factor often overlooked by Vietnamese entities is ensuring that key resources are made available to oversee the listing and related tasks after the listing process is completed.  It should be noted that the listing company is required not only to comply with listing requirements at the initial public offering, but - more importantly - to continue to meet these requirements and comply with regulations throughout the listing.

We believe overseas listing can create many benefits for Vietnamese entities. However, in order to maximise these benefits, Vietnamese entities must give the matter careful consideration, as having a company’s name appear on an overseas stock exchange is not, in fact, an end in itself, but rather the starting point for a new journey on which the company is committing to embark.

 

The role of auditing firms in overseas listing

Auditing firms are involved in the listing process most prominently in connection with the audit of the financial statements companies prepare under IFRS. It is important to remember that, just as with audits of financial statements prepared under Vietnamese Accounting Standards, preparation of the financial statements is the responsibility of the management, whilst the responsibility of the auditor is to express an independent opinion as to whether those financial statements fairly present, in all material respects, the financial position of the company. Auditing firms, of course, can and do provide other services in connection with overseas listing. For example, our firm has assisted a significant foreign-invested company in Vietnam with the Hong Kong stock exchange IPO of its parent company.  In addition, we are advising a prominent Vietnamese public company on preparations for a future listing in the region. Furthermore, we provide:

  • Assistance in preparation of IFRS, USGAAP or other accounts, including training
  • Review of internal controls and corporate governance practices, and recommendations for improvements
  • Audits of IFRS, US GAAP or other accounts
  • Acting as reporting accountant for overseas listing

 

Notes to Editor:

  1. About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

PricewaterhouseCoopers Vietnam

PricewaterhouseCoopers established offices in the Vietnamese cities of Hanoiand HCMC in 1994. Our team of almost 500 local and expatriate staff have a thorough understanding of the transitional local economy in which they work and a wide knowledge of policies and procedures covering investment, tax, legal and accounting and consulting throughout Vietnam. PwC have built strong relationships with key ministries, financial institutions, SOEs, SMEs, the ODA community and commercial organisations. PricewaterhouseCoopers Vietnam has 12 partners, including two Vietnamese nationals and is one of the few firms who have extensive and practical experience in cross-border listing transactions.  PricewaterhouseCoopers Vietnam has assisted companies operating in Vietnamwith their listing process in overseas exchanges including Singaporeand Hong Kong.

 

PricewaterhouseCoopers in Singapore

PricewaterhouseCoopers China, Hong Kong and Singapore operate on a combined basis, subject to local applicable laws. Taken together, there are more than 460 partners and strength of 12,000 people. As of 30 June 2009, PricewaterhouseCoopers audits companies representing 34% of the market capitalisation of the Singapore Stock Exchange, a higher market share than other firms.

Capital Market Services Group in Singapore

Lead by four partners, PricewaterhouseCoopers has a specialised IPO group in Singapore. The group assists and provides advice and guidance to clients at each stage of their listing process. The group works together with investment banks and other professional to assist clients to fulfil all aspects of their listing application requirements.

Overseas clients the IPO group helped to list in Singapore include: Straits Asia Resources Limited, STX Pan Ocean Co., Ltd. , Macquarie International Infrastructure Fund Limited, COSCO, Electrotech Investment Limited, LMA International N.V., Ascendas India Trust, Saizen REIT, Rickmers Maritime, Delong Holdings Limited and Celestial NutriFoods Limited.